Electricity Markets Are At The Center Of Illinois Plant Closures

A battle over power is shaping up in Illinois. It involves lawmakers, but unlike with the state budget crisis they are not playing a central role. This fight involves electricity plants, regulated and unregulated energy companies and the nonprofits that act as air traffic controllers for the electric grid.

Texas-based Dynegy is taking at least three power stations off-line this year, which will reduce generating capacity in southern Illinois by 30 percent. The utility says it’s not cost effective to keep the plants operating.

The main reason behind the decision relates to electricity auctions held by the system operators. In most of Illinois, the Midcontinent Independent System Operator, which prefers to go by the acronym MISO, oversees the auctions and monitors the grid.

“We don't own any power plants. We don't own any transmission lines,” says Corporate Communications Manager Andy Schonert. “Our job is to make sure the grid runs as reliably as possible and it's as efficient as possible."

Suppliers like Dynegy put some of their power into the system with the hope of making enough money at auction to break even, or possibly turn a profit. But that’s not happening. Dynegy says it’s not getting enough money back.

“Because the market doesn't send the proper price signals to the generation in southern Illinois,” says Dynegy Vice President of Regulatory Affairs Dean Ellis, “it’s putting economic and financial pressure on those generators.”

The utility has already taken drastic steps: shutting down the power generating station in Wood River and mothballing some operations at facilities in Baldwin and Newton.

In other parts of Illinois, the grid is managed by the regional transmission organization, PJM. Dynegy wants it to handle the entire state.

“That market is predominantly competitive generators. And the prices are more correct. They are more proper and they value the attributes of generation,” says Ellis.

Dynegy is behind legislation that proposes to eventually shift grid control to PJM. The bill stalled during the last session in Springfield, but Dynegy is prepared to continue pushing the issue.

The company is not ruling out shutting down more power operations if a switch is not made.

“Dynegy has identified at least another 500 megawatts of generation that is at risk,” says Ellis.

“And that would total approximately 30 percent of the downstate generation capacity.”

Less power being produced could lead to higher electricity prices.

Edward Jones Senior Utilities Analyst Andy Smith says if rates go up, the hike probably won’t be a big shock for people powering their home or business.

“The supply of shale gas is just so plentiful, so accessible that we are going to be awash in supply for decades and decades,” he told St. Louis Public Radio.

“When you have that much supply, it’s not going to be an environment where prices increase much, it appears.”

Many of the plants that are being taken off-line in Illinois and other parts of the country are not using the most-advanced technology available. And many of them are coal-fired. Smith says more could be shut down as cleaner-energy sources, including wind and solar, continue to become more affordable. "They are also being shut just because of environmental goals, regulations in various states."

He also says coal will still have a role in the U.S. energy picture.

“We’re definitely seeing a shift. I think it’s going to continue. It’s not like coal is going to be not used anymore. I think for decades and decades to come coal’s going to be a major source of power,” Smith said.

For now, Dynegy is seeking change, so it can improve its business model in parts of Illinois and possibly restore all electricity-making operations in Baldwin and Newton.